The Gap 2008 Annual Report Download - page 70

last day of the three-month purchase period. Accordingly, compensation cost is equal to the 15 percent discount
and the Black-Scholes-Merton option-pricing model is no longer used to estimate the fair value of the ESPP Option
Feature after December 1, 2006. Employees pay for their stock purchases through payroll deductions at a rate equal
to any whole percentage from 1 percent to 15 percent. There were 1,543,827, 1,485,699, and 1,613,116 shares issued
under the ESPP during fiscal 2008, 2007, and 2006, respectively. All shares for ESPP purchases are issued from
treasury stock. At January 31, 2009, there were 10,259,290 shares reserved for future issuances.
Note 11. Leases
We lease most of our store premises and some of our corporate facilities and distribution centers. These operating
leases expire at various dates through 2033. Most store leases are for a five year base period and include options
that allow us to extend the lease term beyond the initial base period, subject to terms agreed to at lease inception.
Some leases also include early termination options, which can be exercised under specific conditions.
We also lease certain equipment under operating leases that expire at various dates through 2012.
The aggregate minimum non-cancelable annual lease payments under leases in effect on January 31, 2009, are
as follows:
($ in millions)
Fiscal Year
2009 ......................................................................... $1,069
2010.......................................................................... 927
2011 .......................................................................... 712
2012 .......................................................................... 520
2013 .......................................................................... 386
Thereafter .................................................................... 1,080
Totalminimumleasecommitments ............................................. $4,694
The total minimum lease commitment amount above does not include minimum sublease rental income of $24
million receivable in the future under non-cancelable sublease agreements.
Rental expense for our operating leases is as follows:
Fiscal Year
($ in millions) 2008 2007 2006
Minimum rental expense ........................................................ $ 992 $ 970 $ 923
Contingent rental expense ....................................................... 126 129 127
Less:Subleaseincome ........................................................... (4) (4) (5)
Total .......................................................................... $1,114 $1,095 $1,045
We have excess facility space as of January 31, 2009 and have recorded a sublease loss reserve for the net present
value of the difference between the contractual rent obligations and the amount for which we expect to be able to
sublease the properties. We had sublease loss reserves of $10 million as of January 31, 2009 and February 2, 2008.
Sublease losses are included in operating expenses in the Consolidated Statements of Earnings and were not
material for fiscal 2008, 2007, and 2006. Remaining cash expenditures associated with our sublease loss reserve
are expected to be paid over the various remaining lease terms through 2016. Based on our current assumptions as
of January 31, 2009, we expect a total net cash outlay of approximately $14 million for future rent.
58 Gap Inc. Form 10-K